Banknote printer and passport maker De La Rue, which recently lost its bid to print the post-Brexit passports to Franco-Dutch firm Gemalto, posted a drop in annual profit on Wednesday.
In the year to the end of March 2018, group revenue was up 7% to £493.9m, but adjusted operating profit declined 11% to £62.8m. The company had originally estimated its annual profit to be between £71m and £73 but lowered this guidance to the low to mid 60s of millions of pounds after it failed to secure the new passport contract.
Chief executive officer Martin Sutherland said: "Over the course of this year, De La Rue has achieved some significant milestones in delivering against our five year strategic plan to transform the group into a less capital intensive, more technology led business. The Invest & Build product lines, namely polymer, security features, identity solutions and product authentication & traceability, now contribute more than a third of the group's revenue and over half of its operating profit.
"Solid growth in all segments has been offset by strategically focused increases in investment in R&D and sales, which will drive long term sustainable growth. While losing the new UK passport tender was disappointing, it does not change our goals, nor does it detract from the underlying performance of the group which remains strong."
Sutherland added that the sale of 90% of the company's paper business earlier this year to private equity firm Epiris and the associated long-term paper supply agreement have reduced its exposure to the volatility of the oversupplied paper market, while securing the surety of supply for its print business.
"Through this, and good cash generation from the business, we have significantly strengthened our balance sheet with net debt now at its lowest in five years. The stronger balance sheet provides the group with greater flexibility to allocate capital to deliver long term shareholder value," he said.
De La Rue said that the £60.3m cash proceeds from the sale of its paper business helped to reduce net debt at the year end to £49.9m from £120.9m as at 25 March 2017, taking it to the lowest level in five years.
At 1035 BST the shares
were up 2.8% to 517p.